TaxTMI 
TaxTMI 
2025 (6) TMI 1196
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....as erred in law in not considering the fact that the assessee is being assessed in the status of AOP for the relevant A.Y. and notional interest was calculated as the assessee trust was in violation of provision of Section 13(1)(d) r.w.s 11(5). 2. Similarly, if we peruse the grounds of appeal taken by the assessee, it will reveal that the assessee has taken three grounds of appeal but its grievance revolves around a single issue namely; CIT(A) has erred in denying exemption under Section 11 and assessing the assessee in the status of AOP instead of granting benefit of Section 11 and 12. More so, the AO has erred in taxing the surplus of Rs. 12,79,427/- which otherwise falls within the ambit of 15% of gross receipts because assessee has applied more than 95% of its gross receipts for charitable objectives. 3. The brief facts of the case are that assessee is a charitable institution imparting educations in the faculties of Engineering, Management and computer applications. It is running K.C. Public School, K.C. College of Engineering & IT, K.C. College of Hotel Management, K.C. Polytechnic College, K.C. School of Education, K.C. School of Management and Computer Application. It....
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....13(1)(c) read with Section 13(3) of the Income Tax Act, therefore, it is not entitled for benefit of 12A and Section 11(5), hence, it is to be assessed in the status of an AOP and surplus over and above the expenditure of the activities of Trust deserves to be assessed as an income. This addition has been confirmed by the ld. CIT(A) and assessee is impugning this addition in its appeal bearing No. ITA- 7/CHD/2024. 6. With regard to the first limb of addition, assessee has challenged both the issues in appeal but regarding first fold of addition, ld. CIT(A) has deleted the addition by recording following finding : "(e). I have gone through the assessment order and the written submission filed by the appellant. It is noticed that the AO was of the view that the appellant had advanced large sum to the related parties in violation of section 13 of the I.T Act. Hence, he proposed to tax notional interest @ 12% on those advances. Without having any specific charging section, the AO cannot estimate notional interest @ 12% on those advances. Upon perusal of the detailed written submission, it is seen that charging notional interest on those advances made in the assessment order....
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....charging Section the AO can't estimate Notional Interest @ 12% on those advances. Upon perusal of the detailed written submission It is seen that charging Notional Interest on those advances made in the assessment order is not maintainable" a) During the Assessment Year the assessee has a gross receipt of fee amounting to Rs. 229726618/- and has spent almost 99.45% i.e Rs. 228456189/- for the educational purposes. Audited Accounts are supplied along with paper book (Page 1 to 4). The question of applicability of Section 11(5) of the Act does not arise as there is no short fall of application of funds below 85% of total receipt during the relevant previous year. b) During the relevant previous year the Assessee was having following interest free funds on which no interest has been paid as per Balance Sheet annexed (PB-Page 1) i) Corpus fund Rs. 13131000. ii) Reserve & Surplus Rs. 35909740. iii) Students welfare activity fund Rs. 28458653. iv) Building fund Rs. 16558424. v) Unsecured Loans from trustees Rs. 109650653. vi) Sundry creditors and other liabilities Rs. 257432852. Total - 461141322.....
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....nd balances were on account of business purposes/ expediency. Hence, the disallowance made by the Assessing Officer in respect of these four parties is not found sustainable and thus deleted". iii) Notional Interest @12% has been charged on all the 17 persons to whom interest free advances made (even though 12 out of these were not related directly/indirectly with assessee u/s 13(3). In respect of remaining five persons who as per AO could be covered u/s 13(3) of the Act have advanced huge interest free Advances to the assessee. List of all the 17 persons along with copies of their Ledger Account has been supplied along with the paper book (PB-PAGES 9-62). iv) The AO did not comment why the Notional Interest for disallowance have been calculated imaginary for the year and not on day to day basis. It is pertinent to mention here that the Assessee has been granted Regular Registration u/s 12A of the Act upto Ay 2026-27 by the PCIT(E). Chandigarh vide order dated 15.10.2021 after verifying all the books & record and no such adverse remarks have been passed. The copy of certificate is attached along with the paper book (PB-Page 128-130). It seems tha....